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It is widely known that over its history the profits of the DRAM market balance its losses - no money is ever made in this market.

This bit of industry wisdom is commonly held, but is it true? I decided to find out for myself rather than to take it for granted.

Objective Analysis maintains a DRAM market
model that estimates many market metrics, including profitability. This is based on reported revenues for DRAM makers and a projection of manufacturing costs.

Although this cost projection was originally based upon a very large data set of individual manufacturer product costs for each of their products, and upon a quarterly unit shipment history by product and manufacturer dating back to the dawn of the DRAM market, the combined result showed us that there were significantly simpler ways to derive data of equal accuracy. Tests of our profit analysis against manufacturer-by-manufacturer profit estimates provided by stock analysts have shown this model to perform well.

From this point it's simple to sum profits over time, and the results of this summation appear in this post's graphic. The Objective Analysis model shows nearly $200 billion in profits have been made in the DRAM market since 1991, out of $477 billion in revenues!

Why, then, do profits elude so many DRAM makers? This has to do with the economies of scale. The capital cost of a competitive DRAM manufacturing plant is prohibitively large, and is growing faster than are market revenues. This simple equation, spelled out in detail in the Objective Analysis Brief: Why the DRAM Market Must Consolidate, is driving companies like Elpida and Qimonda to drop out of the market during regular industry downturns.